Diageo has revealed plans to turn around its profits after the company’s revenue fell to $19.6 billion in the year ending June 30, down 2% year-on-year on an organic basis.

Group operating profits fell 27% to $3.2 billion. Growth in Europe (+3.4%), Latin America and the Caribbean (+7.7%) and Africa (+13.3%) was offset by weakness in North America (-8.4%) and the Asia Pacific (-6.3%).

New CEO Sir Dave Lewis said: “We are pleased with our progress in Latin American and the Caribbean, Europe and Africa. We are focused on recovering our competitiveness in North American and we are working through the consequences of government policy in Chinese white spirits.”

Lewis is preparing to cut $1 billion in costs from the drinks giant over the next three years. The savings will be made from the work on the company’s operating framework as well as further work on its supply chain. 

Analysts have estimated Diageo will probably cut between 3000 and 5000 jobs from its 30,000-strong workforce.

Lewis said: “This new strategy, executing with a new, more agile, competitive and cost-effective operating model, gives us confidence that we can return Diageo to a business consistently creating value for shareholders.

“We remain a business with a very strong premiumisation agenda, but by activating our wider portfolio, we will be able to serve more consumers, across a variety of occasions. There is hard work ahead, particularly in North America, where improving performance is a clear priority, but we are confident we can deliver without taking a step back in operating profit. The team and I look forward to sharing more this afternoon and to the work ahead.”

During a Capital Markets Day last week, Lewis described Guinness and RTDs as two “strategic battlegrounds” for Diageo.

The company will focus on expanding Guinness’ global footprint, investing $US1 billion to double production capacity over the next five years. Smaller bottle sizes will also be implemented for its spirits brands to tackle affordability challenges, particularly in the United States.

Lewis said he will focus more investment on affordable brands such as Smirnoff and Captain Morgan.

“These are very big, very important brands which, quite frankly, we’ve not done a great job with,” he said.

Lewis also plans to introduce RTDs featuring all spirits in its portfolio, noting that the company has not delivered sufficient innovation and quality in the category.

“We have not put our best foot forward in whiskey RTDs; I’m disappointed with the flavours,” he said.

Over the medium term, Diageo said it expected to deliver low single-digit organic sales growth and mid single-digit growth in operating profit.

New APAC head appointed

Diageo has appointed Sujay Wasan as president of its APAC division, effective August 15.

Wasan, who spent nearly 28 years at Procter & Gamble, steps into the position previously held by John O’Keeffe, who earlier this year was appointed president and CEO of Diageo North America.

“We’re delighted that Sujay will be joining Diageo; he is a global leader with a proven track record of consistently delivering breakthrough business results,” said Lewis.

The Asia-Pacific market represents a major focus area for the drinks giant, accounting for nearly 20% of its net sales.